loss-making Air India has announced a slew of cost-cutting measures which include plans to cut reimbursables by 10 per cent and abolition of posts from the non-operational areas. The national carrier has also decided to discontinue loss-making routes, among others steps, to rein in the spending and return to break-even.
The use of expensive hotels or five-star hotels for stay during the travel or holding events has been restricted unless it is unavoidable and the budget for such activities has been reduced by 10 per cent as part of the measures, Air India sources said.
“These cost-cutting measures are part of a two-pronged drive to speed up our return to the break-even status. The measures are aimed at cutting costs under all controllable account heads by nearly 10 per cent,” they said. After a long spell of losses, Air India had recorded a net profit of Rs14.6 crore in December last on account of a healthy growth in both passengers and cargo revenues.
Air India’s total revenue rose by 6.5 per cent to Rs2070 crore during December 2014 as compared to Rs1,944 crore in the same period in 2013. The state-run airline has reduced both its operational and net loss over the last two fiscals. Its net loss came down to Rs5,389 crore in the last fiscal compared with a net loss of Rs5,490 crore in financial year 2013 and Rs7,559.74 crore in FY12.
AI has a cost base of nearly Rs24,000 crore out of which nearly Rs14,000 crore is variable and this includes fuel cost of Rs9,500 crore. “With the decline in fuel prices, the company plans to achieve at least a 20-25 per cent reduction in its fuel bills in the next fiscal, which will be a substantial saving for the carrier,” the sources said.
Air India currently has a 22,500-strong workforce as against 33,000 at the time of merger of AI and Indian Airlines. The sources said that once the hiving-off process of the Air India engineering and ground-handling subsidiaries get operational and some 11,500 employees are transferred on these companies’ payrolls, it would have only 11,000 employees by the next fiscal, which would reduce the airline’s wage bill significantly.
The management has also directed that all routes should be critically reviewed and routes which are not covering fuel cost or variable costs, removed from the network after studying the historical trends, they said.